The US Diesel Engine Landscape Is Clearer - Daimler’s US Approach Has A New Option

Implications: Daimler Truck North America (DTNA)’s US brands of Freightliner, Sterling and Western Star are losing the long-time Caterpillar big bore option and replacing it with Cummins. While those numbers are small, it seems to have firmed up Daimler’s US engine strategy with Detroit Diesel, Mercedes and Cummins engines. This missive will look at Daimler’s US approach with other major players’ to be offered separately.

Analysis: Freightliner is still clearly the Class 8 market leader, although they continue to lose some market share to second place Navistar. This is in part due to the “payback” for the hit truck-owners took from the past Freightliner financing / valuation problems. Their Class 7 market share is slightly ahead of second place Navistar, but with GMC deal closing the gap. With Class 6, it is an almost equal mix among Freightliner, Navistar and Ford (with Navistar / Cat diesels).

In looking at DTNA’s diesel engine offerings, they have the new 15 Liter Detroit Diesel (just a few dozen in the field now), the 14 Liter Detroit Diesel Series 60, the 13 Liter Mercedes Benz 4000 and the 7 Liter Mercedes 900. As options, they are currently offering the 7, 8 & 9 Liter Cummins engines to fill gaps in mid-range trucks. The currently offered Caterpillar options will disappear in 2010 due to the Caterpillar / Navistar deal covered in a separate article, so getting the Cummins 15 Liter option in place by 2009 makes sense.

All DTNA’s engine offerings for 2010 will be Selective Catalyst Reduction (SCR) except for the Cummins Class 8 offering with Exhaust Gas Recirculation (EGR). The Cummins mid-range engines will be with SCR at Freightliner, as they will be at other OEMS. Coming from that industry as an engineer & marketer, one of the oldest OEM tricks and best ways to assess the competition is to buy and use it. From a customer standpoint, it is best to compare like trucks with competitive engines and to keep the other honest. Navistar and Freightliner are the only two fleet (cheap) offerings of consequence, and some customers want to compare the same engine in competitive trucks for the same reasons.

The loss of Caterpillar as a Freightliner option and now tied to Navistar will have some implications. Western Star buyers are most loyal and are most apt to stick with that brand, although interest in ordering Cat-powered ones before 2010 is expected. The Freightliner premium model will be less impacted, as they are often tied to cheaper Freightliner trucks where Detroit Diesel brand has a good following and reputation - and they will be spotlighted with the new DD15 engine with the Cummins 15 Liter option.

The SCR versus EGR discussion we are involved in OEM marketing and fleet planning is more about heat with EGR versus better fuel mileage with SCR. Heat is a big deal with costs estimates that more than double non-EGR maintenance costs. One can see that in both warranty costs at current EGR OEMS versus Cat’s accrurals with ACERT. 2010 EGR heat levels are expected to be increased. An easy way for anyone to check costs is through National Truck Protection warranty program costs. Then quote extended coverage costs from OEM’s. Then assess actual fleet maintenance costs. EGR heat accelerates component and piping failures / costs by notable amounts. As long as they are covered by warranties, it is acceptable - but…

There is considerable planning underway regarding SCR fluid availability. There are all types of levels of offerings of Urea planned among fleets with terminal fuel, major oil companies through distributors / franchisees, major truck stop operators, truck dealers, auto dealers, NAPA stores, farm stores, etc. It will initially be offered similarly to oil in gallon jugs - and ultimately at fueling lanes at higher volume diesel sellers. With all the planning underway, it’s probably going to be overkill in comparison to the actual truck volume ramp up. The biggest concern is Urea shelf life. The ultimate decision will come down to the heat versus fuel mileage argument - and when the EGR-folks run out of emission credits. SCR will not be a big deal if it is about Urea distribution.

Finally, surveys from some of the typical financial firms asked questions about buying SCR engines. None of us want it - e.g. the ’07 prebuy - but the industry isn’t so concerned that they are planning another prebuy. The ’07 engine in-service problems are mostly behind us, but not forgotten. Smart operators will wait until we see them going into service like we will. That will be mid-2010 anyway due to the flow of engines through the supply chain. It kind of reminds me and others of a time during an emissions change when one major engine manufacturer went against the rest of the industry with what seemed to be a simpler approach for the OEM’s and customers. Some of us recall the result.